Brokerages raise outlooks for Hyundai Motor, Kia stocks

By Kim Hyun-bin

Hyundai Motor and Kia are forecast to announce strong earnings results in the second quarter of this year on the back of robust sales in North America, prompting securities firms to the raise target prices of those carmakers, Monday.

Daishin Securities released a report, Friday, hiking the target prices of Hyundai Motor and Kia shares to 300,000 won ($227) and 155,000 won, respectively, from 280,000 won and 140,000 won, expecting both automakers to display robust second-quarter performances.

“Hyundai Motor's sales in North America are expected to continue expanding, contributing to the increased attractiveness of the company's stock. Second-quarter sales would reach approximately 41 trillion won, surpassing the consensus estimate by 11 percent,” Daishin Securities analyst Kim Gwi-yeon said.

“Even with ongoing concerns about exchange rate uncertainties impacting Hyundai Motor's performance, the company can secure an annual profit capacity of 12 trillion won, assuming a decline in the exchange rate.”

Kia is also expected to show solid growth driven by expanding sales in the U.S. Kim stated that Kia's operating profit for the second quarter of this year is estimated to be around 3.4 trillion won, surpassing the consensus estimate of 16 percent and demonstrating six consecutive quarters of positive performance.

Kim added that even with an exchange rate increase, the estimated impact on profits would be around 1 trillion won, ensuring an annual profit capacity in the tens of trillions of won.

Shinhan Securities believes that Hyundai Motor can achieve both growth and profitability by maintaining its competitiveness, as it raised its target for electric vehicle (EV) sales by 2030. The investment rating remains “buy,” and the target stock price of 250,000 won was maintained.

“Hyundai Motor has raised its target for EV sales in 2023 to 2 million vehicles, a 7 percent increase,” Shinhan Securities analyst Jung Yong-jin said. “This upward revision mainly reflects the expected increase in EV sales in the U.S. Furthermore, with the Hyundai Motor Group's dedicated EV factory in Georgia, U.S., known as Hyundai Motor Group Metaplant America (HMGMA), set to start operations in mid-2024, the momentum for EV sales is expected to strengthen.”

Hyundai Motor's investment plan shows a strong emphasis on electrification. Out of a total investment of 109.4 trillion won planned over the next 10 years, 35.8 trillion won will be allocated to EV-related investments. This represents a significant increase compared to last year's investment plan, which allocated 19.4 trillion won to electrification out of a total investment of 95.5 trillion won over 9 years.

The plan includes the establishment of a joint venture for secondary batteries and strengthened sourcing of raw materials and components, leading to a more detailed EV supply chain management system (SCM).

Hyundai Motor rose 0.98 percent to 206,500 won per share, while Kia stock prices increased 2.91 percent to 88,500 won per share at market close on Friday.